In this study, we employ in vitro models to study the factors involved in the differentiation of pancreatic precursor cells into hormone-producing cells of the islets of Langerhans and their mechanisms of action with a goal to develop a system that could be used for cell replacement therapy for patients with diabetes mellitus. Development of the endocrine pancreas includes a series of early events wherein precursor cells migrate to form aggregates that subsequently differentiate into islets of Langerhans. We use cells derived from human cadaveric pancreata, human islet-derived precursor cells (hIPCs) and CD73/CD90/CD105-positive mesenchymal stem cells (+++MSCs), and a human pancreatic cancer cell line (PANC-1 cells) to study regulation of proliferation, cell migration and aggregation that precede differentiation and differentiation itself. Because it has been shown that vascular tissue, especially endothelial cells, is important for normal differentiation of pancreatic precursor cells, we also study endothelial cells. 1) We have now demonstrated that hIPCs are pancreatic MSCs that can differentiate in vitro and in vivo into hormone-expressing cells of the endocrine pancreas. We have preliminary evidence that bona fide MSCs reside in the pancreas in situ and that these cells are different than MSCs derived from other organs/tissues. 2) We extended our initial observations that hIPCs exhibit epigenetic marks that are associated with both active and repressed gene transcription on the insulin gene even though they are not actively transcribing this gene. This type of bivalent modification has been associated with other types of stem cells and may represent a state of commitment for these stem cells to differentiate further to mature endocrine cells. 3) There has been a controversy in the literature as to whether thyrotropin-releasing hormone or its receptor is expressed in the endocrine pancreas in the human fetus or in adults. We showed that the ligand TRH is expressed in the fetal pancreas and that the ligand but not the receptor is expressed in adult human pancreas. Indeed, when we expressed TRH receptors in hIPCs their activation led to programmed cell death. 4) We showed that hIPCs can be transitioned from mesenchymal to epithelial to mesenchymal cell types depending upon the growth/differentiation factors present in the culture medium. These findings suggest that these transitions may occur in situ and be a mechanism for generation of new endocrine cells because the mesenchymal phenotype allows for enhanced proliferation and migration to form new islets.